9.7

Flexible Budgeting and Variance Analysis

I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:

Standard Amount per Case
	Dark Chocolate		Light Chocolate		Standard Price per Pound
Cocoa	11 lbs.		8 lbs.		$5.30
Sugar	9 lbs.		13 lbs.		0.60
Standard labor time	0.3 hr.		0.4 hr.

	Dark Chocolate		Light Chocolate
Planned production	4,900 cases		11,300 cases
Standard labor rate	$15.00 per hr.		$15.00 per hr.

I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:

	Dark Chocolate		Light Chocolate
Actual production (cases)	4,700		11,800
	Actual Price per Pound		Actual Pounds Purchased and Used
Cocoa	$5.40		146,800
Sugar	0.55		190,800
	Actual Labor Rate		Actual Labor Hours Used
Dark chocolate	$14.70 per hr.		1,280
Light chocolate	15.30 per hr.		4,840

Required:

1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year:

a. Direct materials price variance, direct materials quantity variance, and total variance.

b. Direct labor rate variance, direct labor time variance, and total variance.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a.	Direct materials price variance	___	Unfavorable
	Direct materials quantity variance	___	Unfavorable
	Total direct materials cost variance	___	Unfavorable
b.	Direct labor rate variance	___	Unfavorable
	Direct labor time variance	___	Favorable
	Total direct labor cost variance	___	Unfavorable